Many psychology practices run on a service fee model. Contractor psychologists see clients, the practice provides rooms, reception and billing, and the practice keeps a percentage. Depending on how the arrangement works in practice, payments to those psychologists may be treated as wages for payroll tax where the contract meets the "relevant contract" rules and no exemption applies. The substance decides it: who bills the client, who sets fees and hours, and whether the clinician works mainly for your practice. For a practice above the payroll tax threshold, getting this wrong can be expensive, and assessments can reach back several years.
Last checked: 11 October 2026.
On 11 August 2023, Revenue NSW and the Victorian State Revenue Office issued harmonised Revenue Ruling PTA 041 (Relevant contracts – medical centres). Victoria said the ruling is harmonised with rulings in Queensland and South Australia. It explains when a contract between a medical centre business and a practitioner is a "relevant contract", which deems payments to the practitioner to be wages for payroll tax.
The ruling applies to medical centre businesses "including dental clinics, physiotherapy practices, radiology centres and similar healthcare providers" that contract with practitioners to give patients access to their services (Revenue NSW PTA 041; SRO Victoria PTA-041). A psychology practice that holds out to the public that it provides access to psychologists may be in a similar position.
In Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue, the practice collected Medicare benefits on the doctors' behalf, kept a 30% service fee and paid out 70%. The NSW Civil and Administrative Tribunal held the agreements were relevant contracts and the 70% payments were taxable wages ([2021] NSWCATAD 259). The NSW Court of Appeal refused leave to appeal ([2023] NSWCA 40, 14 March 2023) (Revenue NSW case summary).
PTA 041 names the three exemptions most likely to apply to a medical centre and practitioner contract:
You must be able to substantiate any exemption you claim.
Factors that can point toward a relevant contract:
Arrangements where the clinician bills clients directly and pays the practice for rooms and services can produce a different outcome, depending on the facts. Get advice from a payroll tax adviser or lawyer, and review payroll tax and income tax treatment together. Changing the paperwork without changing the substance is unlikely to change the result.
NSW provides payroll tax relief for medical centres that engage GP contractors. This includes a rebate from 4 September 2024 linked to bulk-billing thresholds. Revenue NSW states the rebate does not extend to "non-GP specialists or any allied health service providers" (Revenue NSW). Queensland's GP amnesty also excluded allied health professionals (QRO). Other states and territories set their own rules, so check with the relevant revenue office before assuming any relief applies to a psychology practice.
Assumptions: a Sydney practice with 12 contractor psychologists, $2.4 million in client fees a year, a 35% service fee retained, all contracts relevant contracts, no exemption, no other wages, and no grouping.
Victorian practices: don't apply the NSW figures. Victoria's annual threshold is $1,000,000 and the rate is 4.85%, or 1.2125% for eligible regional Victorian employers, and the threshold phases out for groups with Australian wages between $3 million and $5 million: the $1,000,000 deduction falls by 50 cents for each dollar of wages above $3 million (SRO Victoria). On the same assumptions, with wages well under $3 million so no phase-out applies, a Melbourne practice would pay ($1,560,000 − $1,000,000) × 4.85% = $27,160 a year. On contractors, Victoria's relevant contract provisions are harmonised with NSW's, and its State Revenue Office issued its own PTA-041 on medical centres on the same day as Revenue NSW, so the relevant contract analysis above applies there too. Victoria's own GP relief is different from NSW's: from 1 July 2025 it exempts GP wages for fully-funded (bulk-billed) work only, and the State Revenue Office says it does not apply to allied health professionals, so it does not help a psychology practice (SRO Victoria, medical industry).
Over five years with no change in the business, that would be about $98,100 before interest and penalties. Employee wages (for example admin staff) count toward the same threshold. See payroll tax on contractors, NSW payroll tax and the payroll tax threshold calculator.
Under the Better Access initiative, eligible clients with a valid referral can claim a Medicare rebate for a limited number of psychology sessions each calendar year. Rebate amounts are set in the Medicare Benefits Schedule (MBS), and they are higher for clinical psychologists than for registered psychologists. The client pays the practice fee and claims the rebate, or the session is bulk billed and Medicare pays the rebate to the practitioner as full payment. Check current item numbers and rebate amounts on MBS Online before you set fees.
Assumptions: a $250 private fee, a Medicare rebate of $100 and a 35% service fee. The rebate is illustrative only, not the current MBS amount.
Bulk billing can still be the right choice for access reasons. The point is to make the decision with the numbers in front of you.
Psychology for NDIS participants is paid from the participant's plan. Depending on how the plan is managed, payment comes from the NDIA (agency-managed), a plan manager or the participant (self-managed), each with its own claiming process and timing. Only registered NDIS providers can claim for agency-managed participants. Maximum prices for therapy supports are set in the NDIS Pricing Arrangements and Price Limits, which are reviewed each year (NDIS). Keep NDIS receivables in their own account, reconcile each payment to the claim, and keep a signed service agreement for each participant.
Psychology services are generally GST-free when supplied by a recognised professional and generally accepted in the profession as necessary for the client's appropriate treatment (GST Act, section 38-10). Two points catch practices out:
Code every revenue stream and every service fee with the right tax code, so the BAS reflects the actual supplies.
Utilisation is booked sessions divided by available sessions. A clinician available for 25 sessions a week who sees 20 is at 80%.
Hypothetical: a $250 session fee and a 35% service fee. Each unused session costs the practice $87.50. Five unused sessions a week across 46 weeks is 230 sessions, or $20,125 a year in practice income per clinician.
Hypothetical: 8 rooms open 50 hours a week give 400 room hours. Booking 260 of them is 65% utilisation. The options are more clinicians, longer hours, or giving up a room at lease renewal.
Take the service fee income retained, less allocated direct costs (reception time, software, room share). The result is the clinician's contribution. See job and project profitability.
Neither model settles payroll tax by itself. The substance of the whole arrangement decides it.
Assumptions: a clinician charges $250 a session and sees 22 sessions a week for 46 weeks (1,012 sessions). Option A is a 35% service fee. Option B is a room fee of $450 a day for 4 days a week, 46 weeks a year.
Above about 20.6 sessions a week, the percentage model earns the practice more. Below it, the room fee does.
Report these monthly:
Several different tests can apply to the same clinician, and they don't always give the same answer:
Questions to ask for each clinician:
Get advice on the answers. They affect payroll tax, super and employment obligations at the same time.
Employed psychologists and support staff are commonly covered by the Health Professionals and Support Services Award. From 1 October 2026, health professionals are classified by AQF level and years of experience. Psychologist is listed at AQF Level 9, with a Level 1 starting rate of $1,444.90 a week (award, cl 17 and Schedule B). See our Health Professionals Award reference.
Do psychology practices pay payroll tax on contractor psychologists?
They can. Payments may be treated as wages where the arrangement meets the relevant contract rules and no exemption applies (Revenue Ruling PTA 041). The outcome depends on the facts.
Does the NSW GP payroll tax relief apply to psychologists?
No. Revenue NSW states the rebate does not extend to allied health service providers.
Which exemptions should a practice check?
Services to the public generally, work of 90 days or less in a financial year, and services performed by two or more persons. Each needs evidence.
Do psychology practices charge GST?
Psychology services that meet the GST-free health rules are generally GST-free. Service fees the practice charges contractor psychologists are generally taxable if the practice is registered for GST.
Does a room-fee model avoid payroll tax?
Not automatically. The outcome depends on the substance of the whole arrangement, not the name of the fee.
Do I pay super for contractor psychologists?
Possibly. The super guarantee can apply to contractors paid wholly or principally for their labour. Get advice on each arrangement.
Scale Suite provides embedded finance teams for Australian health practices and SMEs. Visit Scale Suite | Multi-entity and group finance | Outsourced payroll
General information only, current as at October 2026. Scale Suite is a registered BAS Agent, not a licensed tax, financial or legal adviser. Payroll tax outcomes depend on the facts. Get advice on your arrangements.
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